A series of recent developments, above and beyond the Tax Cuts and Jobs Act, continue to place pressure on the ability of nonprofit hospitals and health systems to justify their federal tax exempt status.
First are the recent efforts by BlackRock and other institutional investors (e.g., ISS) to encourage the corporations in which they invest to more affirmatively pursue a "social purpose" and respond more directly to societal challenges.
The BlackRock effort may have the unintended effect of further undercutting the ability of large, nonprofit health care systems to justify tax-exempt status. Both Congress and the Internal Revenue Service (IRS) have longstanding concerns with how the delivery of health care services through a tax-exempt, nonprofit model is distinguishable from the delivery of such services through a proprietary model. To the extent for-profit hospitals and health systems begin to pursue societal purposes, the ability to draw a distinction between the for-profit and nonprofit health care sectors will become more difficult.
And now, most recently, come Senators Charles Grassley and Orin Hatch, raising new concerns with the IRS on whether nonprofit hospitals provide sufficient charity care and other community benefits to justify their tax-exempt status. The two leading senators have asked the IRS to identify how many tax-exempt hospitals satisfy the various Internal Revenue Code Section 501(r) requirements for charitable hospitals.
The general counsel is well-situated to brief the board on these and similar efforts, and to assist organizational efforts to restate and clarify how charitable purposes are satisfied in the nonprofit hospital/health system model.
To view original article, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.